(1)In computing the profits or gains to be charged under Case I or Case II of Schedule D there may be deducted the incidental costs of obtaining finance by means of a qualifying loan or the issue of qualifying loan stock ; and the incidental costs of obtaining finance by those means shall be treated for the purposes of section 304 of the Taxes Act (investment companies etc.) as expenses of management.
(2)Subject to subsection (3) below, in this section “a qualifying loan ” and “qualifying loan stock ” mean a loan or loan stock the interest on which is deductible—
(a)in computing for tax purposes the profits or gains of the person by whom the incidental costs in question are incurred; or
(b)under section 248 of the Taxes Act against his total profits.
(3)A loan or loan stock which carries a right of conversion into, or to the acquisition of—
(a)shares; or
(b)other securities not being a qualifying loan or qualifying loan stock,
is not a qualifying loan or qualifying loan stock if that right is exercisable before the expiration of three years from the date when the loan was obtained or the stock was issued.
(4)In this section “the incidental costs of obtaining finance ” means expenditure on fees, commissions, advertising, printing and other incidental matters (but not including stamp duty), being expenditure wholly and exclusively incurred for the purpose of obtaining the finance (whether or not it is in fact obtained), of providing security for it or of repaying it.
(5)This section shall not be construed as affording relief—
(a)for any sums paid in consequence of or for obtaining protection against, losses resulting from changes in the rate of exchange between different currencies; or
(b)for the cost of repaying a loan or loan stock so far as attributable to its being repayable at a premium or to its having been obtained or issued at a discount.
(6)This section has effect in relation to expenditure incurred on or after 1st April 1980.